Novartis has increased the price of a cancer medicine six-fold. The medicine was previously developed by a Dutch university hospital. Novartis has adopted the medicine under the EU’s ‘orphan medicines’ regime, is therefore protected from competition for 10 years and is hence legally able to raise the price this much. Moreover, it seems Novartis has monopolized (parts of) the supply chain for this medicine, giving it even more pricing power.
The first problem is that the ‘orphan medicines’ regime was intended to give an incentive to pharmaceutical companies to develop medicines for rare diseases. In such cases a temporary monopoly for the discoverer gives a strong economic impulse to develop a medicine. But that is not the case here. In this case it is simply a monopoly on a medicine that was already developed. Second, competition is hampered when companies can monopolize their supply chain through vertical integration without interference of government. In that way pharmaceutical companies can block access to ingredients to competitors, like independent pharmacists. Third, high prices for medicines that already exist increase the chance that healthcare systems cannot afford (all of) them at some point. When only richer people can access these medicines as a consequence, it increases inequality.
EU policymakers should first adjust the ‘orphan medicines’ regime to assure existing medicines cannot be brought under the regime. Competition authorities should also step up to investigate, and if necessary break up, vertically integrated supply chains that lead to medicine monopolies. Lastly, policymakers in general should consider a complete overhaul of the patents system for medicines, as too expensive medicines may lead to increased inequality.